SHANGHAI, Aug. 11 (SMM) – 38% of copper wire rod makers in China are bearish that copper prices will retreat from 50,000 yuan per tonne to 48,500 yuan per tonne, an SMM survey of 21 enterprises shows.
On the liquidity side, growing bad bank loans and company debt default mean that enterprises will continue to suffer from cash tightness.
With respect to market fundamentals, growing SHFE copper stocks will ease copper supply shortfall.
Tighter bank scrutiny over imported copper financing business will also curtail the financial attribute of the red metal. Moreover, investors will still prefer zinc and aluminum over copper.
19% of those surveyed are optimistic that copper prices will challenge resistance at 51,000 yuan per tonne. Stock markets are poised to rise thanks to improving economic data. The central government’s pro-growth mentality means that new projects will be implemented at a faster pace. Liquidity may be injected into the market, also boosting investor sentiment. Thus, investors are likely to jump in once spot copper prices approach 50,000 yuan per tonne.
LME copper stocks approaching record lows will allow LME copper's cash-to-three-month spread to flip into backwardation, also helping spot copper prices in China punch through 51,000 yuan per tonne.
Still, another 14% see little change in copper prices. Traders will enter the market when spot discounts emerge. Downstream producers will buy once copper prices drift lower and consume on-hand stocks after copper prices rise since sales are poor and as copper prices have been moving in tight ranges for almost a month. Improving SHFE/LME copper price ratio will cause more imported copper to flow in, adding to oversupply pressure.